News Corp. profit seen rising on TV, Web growth

DavidB. Wilkerson

CHICAGO (MarketWatch) -- Rupert Murdoch's News Corp. is expected to turn in a higher second-quarter profit Monday on a 5.2% revenue increase due to improved results at its cable- and broadcast-television networks, newspapers and Internet operations.

Analysts will listen carefully for the New York-based media giant's advertising forecast for the March quarter and beyond, as the industry looks for ways to cope with a weakening economy.

The company can also be expected to field questions about whether it has any intention of making a counterbid for online search-engine titan Yahoo Inc.
YHOO
now that Microsoft Corp.
MSFT, -3.39%
has made a $44.6 billion buyout offer. At stake is a chance to compete more effectively against search-ad leader Google
GOOG, -3.91%

For the three months ended Dec. 31, News Corp.
NWSNWS, -1.66%
(NWS) is expected to have earned 28 cents a share on $8.25 billion in revenue, according to the average of analysts' estimates as compiled by Thomson Financial. Its profit in the year-earlier second quarter was 26 cents a share on revenue of $7.84 billion.

At the company's film and television production studios, the prior year was exceptionally strong on DVD sales of "Ice Age: The Meltdown" and "X-Men: The Last Stand," as well as solid box-office returns from "Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan" as well as "The Devil Wears Prada." Laura Martin, large-cap media and Internet analyst at Soleil-Media Metrics, predicts that quarterly revenue at the unit will amount to about $1.89 billion, compared with the prior year's $2.27 billion.

Revenue at the Fox network, MyNetwork TV and the company's television stations is projected to come in just about flat at $1.6 billion a year earlier. Martin's now looking for about a 3% improvement, to $1.65 billion, as she anticipates fewer losses at MyNetwork TV, which has had growing pains since its fall 2006 debut, along with higher advertising rates at Fox than she had expected.

Fox's Sunday night telecast of Super Bowl XLII will surely be a boon to its March-quarter results: The network charged about $2.7 million for a 30-second commercial.

Meanwhile, second-quarter cable-network revenue, from such channels as FX, Fox News Channel and the regional Fox Sports networks, is expected to rise 7% to $1.12 billion from $920 million in the year-ago period, according to Martin. Increased ratings and advertising rates at Fox News Channel will help, she said, though start-up costs at Fox Business Network could hamper results.

News Corp. is the parent company of Dow Jones & Co., which it acquired last year for $5.6 billion. Dow Jones includes The Wall Street Journal, Dow Jones Newswires, Barron's and MarketWatch, the publisher of this report, among other properties.

Chairman Rupert Murdoch may be asked on the earnings call about his statement last week that the company now intends to keep the Journal's online edition subscription-based, rather than making it entirely free, as he had indicated in November.

Like some other analysts, Soleil-Media Metrics' Martin says News Corp.'s near-term return on investment capital will show deterioration in 2008, partially due to the addition of Dow Jones, which saddles the company with another source of single-digit percentage revenue growth, as is now typical of the newspaper business. In addition to its other U.S. newspaper, the New York Post, News Corp. owns such overseas papers as the The Times of London, The Sun, The (Sydney) Daily Telegraph, The Australian, and the (Melbourne) Herald Sun.

Martin continues to expect newspaper revenue at News Corp. to rise 10% for the second quarter, to $1.23 billion, on the effects of a weaker U.S. dollar as well as added revenue from Dow Jones.

In the category News Corp. classifies as "other," which includes the social-networking site MySpace, revenue was $518 million in the year-ago second quarter. For the latest quarter, Martin sees revenue climbing to $750 million, driven by powerful growth at MySpace.

News Corp.'s A shares, the more widely traded of its two classes of stock, slipped fractionally to $19.30 in morning action.

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